Job Or Income Guarantee (JIG)

The job guarantee has been getting a lot of attention in the blogosphere lately. As Bill Mitchell notes in his latest post, some of this has involved questioning whether the job guarantee should be considered integral to MMT. Other discussion has been about the merits of the job guarantee itself. As far as I am concerned, the first question has been answered in the affirmative by the leading MMTers. In this post, I am not concerned with that issue. I am taking as given that the job guarantee is not only consistent with MMT but part and parcel of it. My concern, following on from my previous post, is with the merits of a job guarantee compared with other policy options.

My motivation in this post and my previous one is very different to that of right-leaning critics of a job guarantee. My emphasis is on finding ways to assist a transition to a society in which people can opt for more free time, if they wish. The likelihood of a high degree of mechanization in production in coming decades creates the potential for such a transition.

My previous post led to outstanding discussion, from divergent standpoints, for which I am grateful. It has motivated me to clarify what I have in mind and the reasons for it. My view is that it would be possible to assist a transition to a society in which individuals are largely free to spend their time as they please through a policy combination that also serves the same macroeconomic functions as the job guarantee. This would involve allowing people to choose either a guaranteed job or a guaranteed basic income.

As is usually the case, there was barely anything I disagreed with in Bill Mitchell’s post. But in the conclusion he presents a challenge, and I think it is a worthwhile one to contemplate:

If you want to propose a coherent body of macroeconomic thought then you have to address the key questions of full employment and price stability.

I agree with this statement for at least two reasons. First, macroeconomics, as a discipline, has largely been about full employment and price stability from the outset. These have been central preoccupations of macroeconomics across the theoretical and political spectrum. To be a viable macroeconomic theory, it is necessary to have explanations for unemployment and inflation that can inform policy prescriptions.

Second, from a normative perspective, the goals – particularly full employment – make sense, in my opinion. Those who want a job in the formal economy should not be prevented from obtaining one simply because of poor macroeconomic management. Given our current understanding of flexible exchange-rate fiat currency systems, it is clear that these two goals can be attained simultaneously through a job guarantee. The job-guarantee wage would place a floor under all other wages, anchoring the price system, while the spend on a ‘price rule’ rather than ‘quantity rule’ would ensure all who wanted a job in the formal economy at that wage could obtain one.

What I want to raise as a possibility, more clearly in this post than my last, is that the attainment of these same goals could be achieved by introducing a ‘job or income guarantee’. I’ll call it a JIG. Under this arrangement, a person could choose for themselves if they wanted to engage in wage labor or have more free time to pursue their own vocation or leisure. It would be possible for the voluntary job guarantee to pay more than the basic income guarantee if that was deemed appropriate through the democratic process, but for simplicity I will just assume they pay the same as it doesn’t really affect the argument. The voluntary job guarantee would be identical in its design to the job guarantee currently proposed by MMTers except that participation would be truly voluntary. The proposal of the MMTers cannot be regarded as truly voluntary because anybody who is unemployed and without an independent income would have little choice but to accept the job-guarantee offer. This would not be the case with the JIG, in which income would be provided unconditionally, irrespective of a person’s decision over whether to participate in the voluntary job-guarantee program.

In addition, as mentioned in my previous post, there might also be other voluntary programs a person could join if they did not want employment in the formal economy but did need assistance in making the transition from wage labor to free time. These voluntary programs could offer facilities for people to participate in various activities not considered relevant to employers in the formal economy, and therefore not relevant to the voluntary job-guarantee program. Examples might include arts and crafts, social groups, amateur theater or musical productions, writing courses, and so on. In the previous post, I lumped all the voluntary activities in together, which obscured the nature of what I was suggesting. I think it is clearer to think in terms of a JIG and then whatever other social facilities are provided can be regarded as part of another set of social policies. Here, I will leave these other voluntary activities aside.

My view is that the JIG could help us work towards numerous goals simultaneously.

1. It would open up the option of free time so that those who were ready to embrace it could do so.

2. This would reduce the size of the labor force, and therefore reduce the amount of employment corresponding to full employment. Those opting out of the voluntary job guarantee would not be included in the labor force.

3. The amount of income provided by the JIG would provide a floor under all wages in the economy in just the same way as a ‘conventional’ job guarantee.

4. I think this floor could actually be more effective as a nominal price anchor than a conventional job guarantee. The reason is that only those who really wanted to work in the formal economy would opt for the voluntary job guarantee. The diligence, effort and quality of work would be better, providing a better source of additional or alternative workers to employers in the broader economy.

5. The JIG would place more pressure on employers in the broader economy to offer decent employment conditions and job opportunities than a conventional job guarantee, because employees would have the additional option provided by the basic income guarantee.

6. The JIG would provide automatic demand stabilization in exactly the same way as the conventional job guarantee.

My reason for thinking that a voluntary job guarantee might provide a more effective nominal price anchor than an essentially compulsory job guarantee (point 4 above) is as follows. Of the people most likely to opt out of the job guarantee, most would fall into two categories: (i) people who don’t want to work; (ii) people who don’t want to work in the formal economy because there are other socially productive things – broadly defined – that they would prefer to do. Included in this group might be home parents, carers, charity workers, hobbyist gardeners, environmentalists, activists, writers, musicians, artists, actors, athletes, computer programmers, people seeking self-education, bloggers (!), etc.

People in category (i), if essentially compelled to participate in a job guarantee, would be the least enthusiastic and diligent in the program, and therefore would actually detract from its nominal price anchor role, because they would not be providing viable alternatives, from the perspective of employers, to those already employed. To the extent their attitude rubbed off on others, the effect might be a lowering of the average “employability” of the job-guarantee cohort. I think, for these individuals, it would be more beneficial if facilities were made available for meaningful leisure activities that might lead, in time, to a desire to mix leisure with more creative or socially productive behavior outside the formal economy. If they chose to participate in such activities, they would be doing so voluntarily, and so would feel less resentment and perhaps be more open to potentially life-enhancing and more socially interconnected experiences.

People in category (ii), if compelled to participate in a job guarantee, might add less of value to society than they could if freed to pursue their own vocations either individually or in voluntary association with others.

In response to my previous post, various objections were raised against my position on the job guarantee. Addressing a few of these objections here may help to flesh out my thinking on the issue.

One point made was the need to be realistic in the kind of social transformation that we could expect to occur in the immediate term. Even though the ultimate aim may be more free time, currently many people are unaccustomed to such freedom and derive much of their sense of order and belonging from employment in the formal economy. For example, Neil Wilson wrote:

JG would provide a lot of people with some sort of purpose. Not everybody has a sufficiently developed sense of internal motivation to allow them to contemplate what they should do with a life free from labour. Just look at the health and mental problems amongst the legions of the early retired. It isn’t easy when our world is so centred around the work relationship.

So first let’s make the work relationship equitable, then, in response to the non-job arguments, we can raise the issue of “what else are they going to do?”

I agree that the challenges many people are likely to face in making the transition from formal employment to free time is highly relevant. My problem with the argument that this therefore calls for a job guarantee rather than a ‘job or income guarantee’ is that it is a backward step specifically in relation to the shift from the current work ethic to an embrace of free time. At the moment, draconian though the current system is, some people have become accustomed to free time, either through extended involuntary unemployment or underemployment. In some cases, maybe for only a small minority, an unintended side effect of this forced break from employment may be that it prompts a reconsideration of personal priorities. What in some cases may initially seem a curse (especially part-time rather than full-time work) may turn out to be a blessing. Not in all cases, certainly, but in some. In this way, there is some change in consciousness that can help to facilitate a transition to a society offering more free time. By placing the onus on the work relationship even more strongly than is already the case, the job guarantee may be counterproductive in this specific sense.

I certainly agree that there would be scope with the job-guarantee program, if implemented as proposed by the MMTers, for us to push for a broadening of what is considered “productive” over time. If the job-guarantee program is introduced, that would seem to be the logical next step in terms of activism. But, equally, it also opens the way for pressure to be exerted in the opposite direction. Strong efforts would undoubtedly be made to eliminate the positive aspects of the job guarantee and turn it into workfare.

Some other commentators addressed political realities. For example, Dan Kervick noted that there is already resentment towards welfare policies let alone a basic income guarantee. Tom Hickey, in contrast, suggested that a negative income tax may be more palatable to many in the U.S. than a job guarantee. I fully acknowledge the relevance of these concerns. Frankly, I don’t know how unpopular either policy approach is likely to be, but I agree the political opposition currently appears formidable. Even so, I think discussion of the relative merits of different policy options remains important. As Bill Mitchell wrote in his post:

Whether the defining elements are politically palatable, attainable, or culturally pleasing is irrelevant in theoretical terms. Ideas are not intrinsically popular – which is where the political domain operates. To be elected you have to be popular. Ideas are also not intrinsically time-bound. Some ideas are developed before anyone will accept them as knowledge (in the sense that the theoretical notions are not inconsistent with reality).

Especially in the age of the internet, our discussions can conceivably have unexpected and unknown effects both now and in the future. Maybe the JIG and even the JG are before their time. We’ll see. But even if they prove unrealistic options this time round, they – or proposals like them – may come into their own at some point in the future.

Equally, the way we design current policy has an influence on the kinds of policies that will be feasible in the future. If we don’t start implementing policies now that begin to encourage a different attitude towards life and a transition to free time, when will it ever be feasible to implement such policies? Fifty or a hundred years down the track, people may still be saying the same thing: “That is for the future, for now we must be realists.” Yet, it has been technically feasible to embrace more free time for quite a while.

I also should briefly address Philip Pilkington’s concern:

I think that modern history has been the history of self-directed people trying to turn other-directed people into self-directed people. I guess that’s what we call ‘Utopian politics’ (Rousseau, Robespierre, Lenin, Marx etc.). Any politics that tries to mold the Nature of Man through institutions. It always ends in despotism.

My view is that the institution wage labor has done as much as any other institution to mold the way people think about their lives. Mechanization is likely to free up time unless we introduce even more institutions to continue the molding of people’s thinking to the ways of wage labor. My suggestion is aimed at giving maximum freedom to choose wage labor or something else. This is no greater an attempt to mold people’s thinking than the current system. It gives people more choice to determine their preferred way of living. If it’s really true that many people prefer to be told what to do, then they may continue to opt for wage labor. Or perhaps they will form voluntary associations with others who are inclined to take leadership roles, preferring to work under their direction.

As I made clear at the outset, there is very little I disagree with in Bill Mitchell’s post, but perhaps the following sentence from the conclusion hints at a difference in our world views, which may explain why I am less enthusiastic than many others about the job guarantee in its currently proposed form:

In terms of the Job Guarantee – my ideological preference is not to have such a capacity. I would prefer everyone to be gainfully employed doing what they love and earning the best wages they could.

I love that sentence except for two words: “employed” and “wages”. My ideological preference is for everyone to be able to do what they love without the compulsion to sell their labor power to an employer in exchange for a wage. This is perhaps what most makes me hesitant to support the job guarantee rather than a ‘job or income guarantee’.